hey everyone peter zion here coming to you from the houston airport on april 12th uh the big
news today is that the biden administration is extending the ethanol mandate in an attempt to
lower gasoline prices in the united states uh the mandate was first established uh we're pushing 20
years ago now in order to put corn into the fuel mix so we have something called e-15 gasoline in
march of the united states for at least much of the year is 15 ethanol this new announcement would
allow that 15 to persist within the fuel system year-round the idea is it's going to knock about
a dime off of energy costs and off gasoline costs and that that seems like a reasonable number to me
the problem is that between events in russia and ukraine and china the world has
massive shortages of all of the fertilizers that we use to grow crops and any bushel of corn
that is being used for ethanol is a bushel that is not being used for something else
now despite the name corn most american corn is not fit for human consumption and it's
primarily used for industrial uses and half of all corn produced in the united states
ultimately makes it into an ethanol fuel mix this will increase that percentage a little bit now
the timing of this has a lot of impact because we are now getting into planting season
for most of america and so farmers are making the decision about what they're going to put into the
ground corn is a fertilizer intensive crop far more than soy or wheat and by putting this mandate
expansion into place the bite administration is absolutely encouraging uh the planting of
corn remember he's not an economist he's a populist he's not a democrat he's a populist
and his goal is to remove whatever pain he can from his constituents as quickly and as
seamlessly as possible this fits with that the problem is that any corn we plant now
it means that later we have a harvest season is less soy and less wheat and
less of the things we actually eat and we are already dealing with a global food crisis
because of the global food shortage and because i'm sorry global fertilizer shortage and also
because we're losing uh products most notably wheat from both the russian and ukrainian spaces
so while this will make the american consumer a little happier about gasoline it will hugely
impact the global consumer because of the lack of food at a critical time we are now shifting away
from producing more foodstuffs when the world is already at a shortage in order to produce
more energy for the united states so just keep that in mind this was an opportunity for the
administration to get ahead of the food crisis and instead he's decided to get ahead of the
energy pinch that we're feeling it's not really a great choice here
but we're going to feel this a lot down the line okay that's it from me until next time
the more important um dynamic force that's underway is that these markets for food and
commodities globally are not controlled by government they're controlled by private
businesses and there's a market for these products and so what happens is as the food supply chain
threat hit countries like china and others started to stockpile they started to buy lots and lots of
supply drive up their stocks and their reserves you know for fear of the famine that's about to
hit us in about nine months and when they did that there was now less food available to tunisia to
eritrea to egypt and so on and so we're starting to see the effects of that dislocation driving
dynamic market forces where certain buyers stock up and then the folks that can't afford to step in
not being able to acquire product and being left so not only do we have a local
production differential that makes it hard to have all calories be fungible we're also seeing this
dynamic where there's a bifurcation where the habs have more and the have-nots have less and that's
going to really make this famine kind of hit home you know in a really really sad way in the months
to come we're already seeing as as i mentioned two weeks ago yeah i i as i mentioned a few weeks ago
the fertilizer problem driving acreage down so the usda farm report comes out they survey farmers and
figure out how much they're going to plant every year and they just downgraded the number of corn
acres they're going to get planted this year which is happening starting this month from 93 million
acres to 89 million that doesn't sound like a lot but four million percent yeah four million
acres coming out of production of corn in the u.s is an incredible amount of calories that are not
going to be planted to corn and so that has all these downstream effects and again this this crop
doesn't come to harvest till you know september or october then it's going to get processed and
it turns into food so by the time the the effects of this decision making hit the marketplace
the availability of calories and the stock power that's going on it's like boom some countries
are going to be you know they're going to have a limited budget they're only going to be able to
access so much food and they can't access any and other countries are going to be fine the united
states going to be fine western europe will be fine china will be fine sri lanka is going to be
a mess northern and eastern africa is going to be a mess i mean there's like places around the world
that we are going to have to scramble i don't have a real easy answer there's no
simple plug and play here it's going to be a really complex set of problems that are going to
need to be solved well sri lanka does grow a lot of its own food so they may be okay because
they're a net importer right i mean they're a pretty big net importer so they make a lot of
food but they they rely on imports a lot for for calories there so yeah i mean and that's the case
with a lot of places around the world a lot of people think oh we have farmers but most countries
you know particularly in the developing world are net importers they they rely on third party
supplies of food i mean i think that the ukraine war is kind of entering a chronic phase i mean the
sort of entering a new phase the first phase you'd have to say that ukrainians won the you
know the russia wanted to topple zilinski's regime maybe take kiev they obviously failed in that now
we're in this uh phase where the fighting is over in the dawn bass it's basically the civil
war that's been going on there since 2014. and um and and really that's what it's now about
uh zielinski has acknowledged that ukraine will not be part of nato so that issue is kind of off
the table and so what they're really fighting over now is the status of these disputed territories
in uh eastern ukraine and i think it's going to go on for a long time that's what you know general
millie testified it could go on for years i think it's going to become a sort of permanent feature
in the background of biden's presidency and i mean i think the good news is that hopefully the war
3 aspect is off the table it seems like the calls for us to impose a no-fly zone or to put boots on
the ground which you were hearing a lot of a few weeks ago seems like that's off the table so now
it's going to be a protracted i think civil war going on in the dawn bass uh with between ukraine
and and uh russia and their proxies well i mean if the goal is to blue p bleed putin yes it could be
effective bleeding putin however i don't know that that needed to be the key geo-strategic objective
of the united states right now i don't know i don't know because look china is our main threat
china is a pure competitor to the united states russia is not our economy is 15 times bigger than
russia's china's economy is about the same size as ours that is a real threat so you know there
are costs to us as well there are clearly cost of putin of this but there are a huge cost to us as
well uh freebird described the risk to the supply chain we've had to now spend a lot more money
building up the defense in europe we're going to be pinned down in europe uh we should really be
moving some of those resources from europe to east asia i mean that's really where the pivot to asia
is what we thought we were supposed to be doing until quite recently now we're gonna be bogged
down there and there's still risks of inflation and recession in the u.s and i think if we are
in a recession later this year i think a lot of people in the u.s will be asking what was this all
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